Vicki Pollock is a bricks and mortar retailer’s worst nightmare. Every week the 28-year-old Sydneysider checks her inbox to see the latest customised offers from her favourite retailer, the pioneering online designer fashion hub net-a-porter.com.

While increasingly frugal consumers are watching their wallets and squirrelling away more of their weekly earnings, Pollock is still spending hundreds of dollars a week – mostly online.

“In the last six months the only things I’ve bought in a store are some DVDs from Big W, one pair of pants and one shirt from Country Road and that’s it besides groceries," Pollock says.

Pollock is not the only cashed-up shopper shunning bricks-and-mortar stores for the thrill of internet shopping.

While retail sales are soft and discretionary retailers are bracing for another lacklustre Christmas, internet retailers are struggling to meet soaring demand.

Internet analyst Forrester Research estimates that Australian online retail sales will hit $28 billion this year, up 17.5 per cent from last year. Excluding spending on financial services, travel, accommodation, music and tickets, Frost & Sullivan expects online sales to rise by almost 10 per cent to $12 billion this year, representing 5 per cent of total retail spending.

Within two years, online spending is expected to reach almost $18 billion, eclipsing the growth in “traditional" retail sales.

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Broker Morgan Stanley believes internet retailing will account for 22 per cent of the incremental growth in retail sales over the next five years, reaching $30 billion.

As more consumers buy electronics, clothing, shoes and homeware over the internet, sales growth in stores will slip behind historic growth rates.

Broker Goldman Sachs estimates that retail sales growth would have been 3.25 per cent stronger over the 12 months ending October, almost double realised growth of 3.9 per cent, if not for the strong growth in online retailing and outbound tourism.

Australia’s major retailers, who have been notoriously slow to embrace online retailing, are now working against the clock to build a "clicks and mortar" presence.

“Online retailing is the major difference between Australia and offshore retailers," says PwC partner for retail and consumer goods Stuart Harker. “They are now running as hard as they can to catch up, but it’s more consumer pull than retailer push," Harker says. “Consumers now have all the infrastructure in place and reasons to buy anything they like online."

Australia’s largest retailer,
Woolworths
, which launched a BIG W e-commerce site in May and now offers about 4000 products online, will launch a transactional site for its Dan Murphy’s big-box liquor chain next month. Last week Woolworths acquired the domain name hardware.com au, although it has no immediate plans to sell hardware online when the first of its big-box stores opens next year.

Woolworths’ online sales are currently just over $100 million, a fraction of annual revenues of $52 billion, but chief executive
Michael Luscombe
sees scope for online sales to reach $1 billion “in the not too distant future".

Most of the growth is expected to come from Woolworths’ online grocery site, Homeshop, which is being rolled out across Australia. Online sales at Dick Smith and BIG W are also growing strongly.

“For us there’s a lot of work behind the scenes making sure everyone is on the same platform so we have efficiencies working in our favour," a Woolworths spokeswoman said.

Coles is also expanding its online grocery offer after re-engineering the business from a warehouse distribution model to one where groceries are picked from supermarket shelves.

“It’s a niche business, albeit one that’s been growing quite rapidly over the last 18 months," a spokesman said. “Growth is being driven by an increasing take-up of the offer and a rapid rollout of the service," he said. “We now have a model that’s feasible and using store pick does give us flexibility to roll it out a lot more easily these days."

David Jones
, which closed its original ecommerce site in 2003 after incurring unsustainable losses, relaunched a “gift giving" site in November and now sells about 1000 products online.

Myer
has also revamped its online site and flagged an even bigger thrust in the ecommerce area after creating the new role of general manager internet business last month. Myer now sells about 8200 products online and says sales have doubled since it revamped the site.

Both Myer and Harvey Norman have threatened to launch offshore websites to better compete with overseas online retailers who can sell products without incurring 10 per cent GST and import duties, which range as high as 50 per cent in some categories.

Target managing director
Launa Inman
yesterday joined the call for more even-handedness. “If there was a level playing field for Australian retailers selling online it would make the financial case for online retailing more compelling," Ms Inman said.

Target plans to start selling products online early next year, but sister store Kmart, which has undergone 18 months of restructuring, has yet to unveil its ecommerce ambitions.

Target initially plans to offer about 700 products early in the new year, building its range over following months, and has set up a dedicated warehouse in Melbourne.

“We see our online store complementing our bricks-and-mortar operation and while it is difficult to ascertain growth rates, our current research indicates it will eventually generate the equivalent of a large Target store in sales," Ms Inman said.

Billabong
, which has acquired stakes in online sites surfstitch and swell, expects internet sales to reach 10 per cent of group sales in five years.

Morgan Stanley says bricks-and-mortar retailers that go online will benefit from having greater brand recognition and buying power, but online-only retailers have a much lower cost base because they don’t rent stores.